Fourth Quarter Provides Strong Finish to 2011 Paid Search Trends

With the close of 2011, it is now time to update our quarterly paid search spend analysis of key trends across the globe in search advertising, and update advertisers on Q4’11 performance:

  • Spending on paid search advertising was up by 7% in Q4 ’11 from Q3 ’11. This is after a sizeable increase in spending in Q3 ’11. This holiday season, spending in the consumer electronics sector, as well as continued investment in business analytics and information management solutions, drove modest growth. Q4 ’11 paid search spend was up 28% from Q4 ’10, which was a strong quarter a year ago.
  • On a full year basis, growth in 2011 for paid search was up 21% over 2011 spending—just north of what we expected at the beginning of the year, when we predicted 15 – 20% growth.

The chart above shows how spending has increased since 2009. Ad spend for our clients has been normalized such that Q1 ’09 equals 100%.

  • North America, powered by the U.S. and Canada, saw strong spending growth in the quarter, which was up 11% quarter-on-quarter and 18% year-on-year. Growth annualized was 10% for North America—the bottom-end of our 2011 forecast range from the beginning of the year.
  • In EMEA, growth was down 8% quarter-on-quarter, but up 9% year-on-year. Overall, paid search spend growth for the year was 22%, which was slightly below our 2011 forecast. We attribute the deceleration in spend to the general macro-economic slowdown in the region.
  • APAC continues to be where the major growth opportunities exist for the high-tech industry. Quarter-on-quarter search spend growth was up 8%, while year-on-year growth was up over 100%. With a 97% annualized growth rate, we are seeing continued investment in Japan, China, India, and the ANZ economies.
  • On a global platform basis, advertiser increases in spending on Google were up 8% from Q3 ’11 and up 27% year-over-year, while spending on Yahoo-Bing was down 1% from Q3 ’11 and down 18% from a year earlier. Spending on Baidu, which commands the majority of market share in APAC given its dominance in China, grew 19% quarter-on-quarter and 185% year-on-year.

For the first time since mid-2010, the 2 – 3% quarter-on-quarter CPC inflation has subsided, at least temporarily. Changes in consumer behavior, combined with more effective advertising strategies and improved matching algorithms, are key factors in this trend.

Actionable Insight:

Paid search spending in 2011 was up 21% from 2010. For 2012 we recommend that global advertisers plan for budget increases of 18 – 22% for paid search, with a regional breakdown as follows:

  • 18 – 20% growth in North America
  • 15 – 18% growth in EMEA
  • 40-plus % growth in APAC

All of this information and more is available in our latest report – Covario’s Q4 2011 Global Paid Search Spend Analysis, which is now available on our website.